Small business

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6) Specific targets and actions to be taken
- sets out the priorities in terms of:
- Key future needs to be tackled
- Key future policy targets
- Planned changes in policy management
- Planned institutional and stakeholder capacity development
- Future programme development;
7) Overcoming barriers to achieving future objectives - sets out what actions will be taken, by whom, to achieve
the targets;
8) Management, monitoring, evaluation and control
- sets out the means to provide continuous assessment,
feedback and evaluation in respect of government strategies and plans.
IV. DEFINITIONS
How SMEs are defined usually depends upon the scale and structure of business in the economy and
varies from country to country. Definitions are useful:
• In the preparation of statistics and the monitoring of the health of the sector over time;
• In benchmarking against other economies and between regions within an economy;
• In providing arbitrary thresholds for imposition of tax or other regulations;
• In determining eligibility for particular forms of public support.
The most commonly used measure is that of employment, due to its simplicity and the ease of collection
of data. Turnover and assets employed can also be measured but both are problematical. Relatively small
firms (in employment terms) can have a large turnover as a result of buying in large quantities of
components. There are also major problems in consistently monitoring asset values. A more satisfactory
measure would be that of added value but this is difficult to calculate.
A general distinction can be made between self-employment, micro, small and medium sized
businesses. The European Union follows this convention as follows:
EFFECTIVE POLICIES FOR SMALL BUSINESS - © OECD 2004
Introduction
20
Number of employees
0
Self employed
2-9
Micro business
10-49
Small business
50-249
Medium-size business
In official statistics, it is not always easy to distinguish independently owned companies. If, for example,
employment data is collected at the establishment level then it is likely that these statistics will include
a significant proportion of units owned by larger firms. Yet, from a policy viewpoint the characteristics of the
owner-managed independent business are substantially different from those of the small subsidiary firm
of a large organisation. Such characteristics radically affect SME responses to policy initiatives.
A qualitative definition that embodies this distinction would particularly reflect issues of ownership
and (inter)dependence. Being a small entrepreneur fundamentally means coping with (and enjoying) high
levels of autonomy: standing alone and having total responsibility for the full range of business activities.
Within the firm, personal relationships and individual qualities are more important than formal hierarchies
and promotion systems. Because the firm’s own resources are limited, there is at the same time a high
dependence on suppliers, banks, accountants, etc., and on appropriate, supportive legislation. Owner-
managers have to be close to their customers (if they don’t sell they don’t live). Business networks become

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social networks, and the entrepreneur’s standing in the community is highly dependent on success or
failure.